A. GENERAL RULES FOR DETERMINING THE COUNTRY OF ORIGIN
The only multilateral agreement on rules of origin is the Kyoto Convention (concluded on 18 May 1973 and entered into force on 25 September 1974) – the International Convention on the Simplification and Harmonization of Customs Procedures.
The provisions of the Kyoto Convention are not formulated in the form of direct action rules, but as general principles upon which national legislation should establish specific rules for customs procedures regulation. This approach should allow the national legislation to strike a balance between speeding up and simplifying customs procedures as a means of foreign trade promoting as well as ensuring customs control reliability, so as to establish of a fair compromise between the interests of the business community and the state. The basic principle of the Kyoto Convention is the need to simplify customs procedures in order to facilitate and accelerate foreign trade, eliminate unjustified administrative barriers.
Specific Annex K "Origin of goods" of the Kyoto Convention describes the general rules for determining the origin of goods.
- Country of origin of goods – the country where goods were fully produced or have been subject to substantial processing.
- Rules of origin - specific provisions, developed from principles established by national legislation or international agreements ("origin criteria"), applied by a country to determine the origin of goods. The rules of origin should not constitute unnecessary barriers to international trade.
General Agreement on Tariffs and Trade (GATT 1994) does not contain specific rules for determining origin. This fact provided countries with flexibility in adopting their own rules and applying them differently, in accordance with the purpose which they are used for. Origin means the economic "nationality" of goods in international trade. There are two types of origin: preferential and non-preferential.
1. Non-preferential rules of origin
Non-preferential rules of origin are used to determine the origin of goods subject to commercial policy measures, such as anti-dumping and compensation duties, trade embargoes, safeguards and countervailing, quantitative restrictions, but also for tariff quotas, trade statistics, procurement and designation of origin, etc. In addition, export refunds in the EU Common Agricultural Policy rely mostly on non-preferential origin.
2. Preferential rules of origin
Preferential origin confers certain benefits for the goods traded between different countries, particularly low or even zero duty. Preferential origin is attributed to goods from different countries that meet certain criteria of origin.
In order to obtain preferential origin, goods from one country must comply with the specific terms of the origin protocol within the agreement between EU and the country concerned or with rules of origin within autonomous agreements providing unilateral tariff treatment granted by the EU.
This means that goods:
- are made of raw materials that have been produced or obtained in the beneficiary country;
- have undergone a certain processing or transformation in the beneficiary country.
Such goods are considered "ORIGINATING".
In both cases, an important element in determining the origin is their tariff classification. EU marketed goods shall be identified by a numeric code in the Combined Nomenclature and before determining the origin, it is essential to determine CN code.
B. RULES OF ORIGIN
The basic rule: In order for a product to be originating from a country, it must be wholly obtained in that country or the last substantial transformation in that country must be known.
In the case when only one country is involved, the criterion "wholly obtained” will be applied. In practice, this is limited to goods produced naturally and their derivatives.
If two or more countries are involved in the production of goods, the criterion of "last substantial transformation" determines the origin of goods.
1. Products "wholly obtained"
Kyoto Convention contains a list of products that can be considered as wholly obtained in a particular country:
- mineral products extracted from marine soil or subsoil;
- vegetable products harvested there;
- live animals born and raised there;
- products from live animals raised there;
- products obtained by hunting and fishing;
- products of sea fishing and other products taken from the sea outside the territorial waters of the country by their ships;
- used articles collected there, only intended to recovery of raw materials, including used tires for retreading or for use as waste;
- waste and residues from manufacturing operations;
- products extracted from marine soil or subsoil outside their territorial waters, provided that they have the exclusive right to exploit that soil or subsoil;
- goods produced in the country exclusively from products referred to in the previous points.
2. The criterion of "last substantial transformation"
Kyoto Convention defines this processing as one that is sufficient to confer "essential character".
Wholly obtained good concept has very limited practical relevance in international trade, reason for not using alternative definitions for it. Regarding the last substantial transformation, it has other definitions as well:
- in the EU: “the last, substantial, economically justified procesing, in an enterprise equipped for that purpose, resulting in a new product or representing an important stage of production”
- in the USA: “processing should be substantial to lead to the production of a new and different product, which has a distinct name, characteristics and uses”.
In order to operationalize the concept of "substantial transformation", three specific criteria are used:
- by means of the Harmonized Tariff (sub) heading replacement rule;
- through the list of goods processing or transformations, which confer or not country’s origin were these operations were performed;
- the added value rule by which the increase in value due to assembly operations and incorporation of materials represents a certain level of ex-works price of the product.
Information on the origin of the goods can be viewed.
C. WHAT IS THE CERTIFICATE OF ORIGIN NECESSARY FOR?
Certificate of origin – adocument certifying the origin of goods, necessary at customs clearance in order for the buyer to prove that the goods do not come from a country where due to various reasons, the buyer's country does not accept importing the respective goods.
In other words - a certificate of origin is an important international trade document stating that the goods of a particular export transfer have been wholly obtained, produced, manufactured or processed in a particulat country. It is also a statement by the exporter.
Preferential certificates of origin issued under the preferential trade agreements allow exporters to benefit from tariff reductions or exemptions on eligible exports.
Distinction should be made between "Made in Moldova" and the term "Originating from Moldova". In many instances, the goods produced in Moldova cannot have the status of Moldovan origin.
Usually, certificates of origin are requested by customs authorities of the importing country for the purpose of application of tariff and non-tariff measures when importing goods into the customs territory of the respective country.
Certificates of origin may be required also by banks, if the parties to implement the agreement of foreign trade indicate the availability of such certificates in their banking credentials.
Certificates of origin shall be issued upon request, based on the export invoice. It is mandatory to include in the certificate of origin: consignor’s name (or the supplying company), recipient’s name (or beneficiary), country of origin, products’ name, measuring unit and quantity.